Starz Dimming at Liberty Media

As John Malone indicated Monday, Liberty Media's ( L) international operations show a lot of promise. But things don't seem as bright as they used to for one of Liberty's big stateside businesses.

Programming costs at the company's Starz Encore Group of premium channels, already slated to substantially increase in 2004, will significantly climb in 2005, the company forecast Monday.

That 2005 increase -- which the company hadn't projected in earlier filings -- means that any recovery at the flagging Starz Encore will be pushed back from 2005 to 2006 at the earliest, according to the analyst who caught the disclosure.

The disclosure also serves as a reminder of the power of Comcast ( CMCSA), the nation's largest operator of cable TV systems. Under an agreement that Comcast inherited when it bought AT&T's ( T) cable systems in 2002, Starz Encore was able to pass on programming cost increases to the AT&T Broadband systems. But after Comcast -- which was responsible for 24% of Starz Encore's revenue last year -- objected to the inherited terms, the companies ended up settling on a new agreement , one in which Comcast is off the hook for the programming costs.

Fizzling

The relevant disclosure, found in Liberty's voluminous 10-K filed Monday, is a brief mention of expected programming expense increases for Starz Encore, which reported $398 million in programming costs for 2003. Starz Encore comprises 14 movie channels, including the Starz! first-run movie channel and Encore, which runs a mixture of first-run and less recent movies.

Starz Encore's programming expenses are expected to increase between $170 million and $190 million in 2004, Liberty says. While nothing to sneeze at -- at the midpoint, it represents a 45% increase -- that's a more optimistic picture than the company's previous forecast of a $175 million to $225 million increase.